SEC sues Volkswagen and former CEO Winterkorn, citing 'Dieselgate' fraud on investors

Mae Love
March 15, 2019

U.S. authorities have taken legal action against Volkswagen and its former chief executive, Martin Winterkorn, over the German auto maker's diesel emissions scandal, accusing the company of perpetrating a "massive fraud" on United States investors.

The SEC's complaint, filed in a US District Court in San Francisco on Thursday, centers around the fact that VW issued $13 billion worth of bonds and securities in the US between April 2014 and May 2015 without disclosing any knowledge of so-called cheat devices in diesel cars.

The complaint claims Volkswagen made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and the company's financial standing, which gave Volkswagen a financial benefit when it issued securities at more attractive rates for the company.

Volkswagen said in a statement the SEC complaint "is legally and factually flawed, and Volkswagen will contest it vigorously".

VW has already paid out billions of dollars in fines to U.S. and German authorities in criminal and civil actions. No investors were harmed, VW said.

VW did not immediately respond to a call for comment at the time of publication.

The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest and civil penalties.

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Winterkorn resigned in September 2015 and was charged by USA prosecutors in 2018 for allegedly conspiring to cover up the German automaker's diesel emissions cheating.

It adding that VW "repeatedly lied to and misled U.S. investors, consumers, and regulators as part of an illegal scheme to sell its purportedly "clean diesel" cars and billions of dollars of corporate bonds and other securities in the U.S.".

VW has spent billions to pay claims from United States-based VW owners, environmental regulators, states and dealers, and has offered to buy back about 500,000 polluting USA vehicles.

Allegations that VW wrongfully withheld information about the emission software used in its diesel cars have loomed over the company since the scandal first broke in 2015.

"As we allege, Volkswagen hid its decade-long emissions scheme while it was selling billions of dollars of its bonds to investors at inflated prices".

In total, 13 people have been charged in the U.S., including Winterkorn and four Audi managers. Two VW executives have been convicted in the scandal and are now serving sentences in USA federal prisons.

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